KPMG: PPACA Ruling Could Kill Some State Exchange Programs

The U.S. Supreme Court ruling on the constitutionality of the Patient Protection and Affordable Care Act (PPACA) should make some states lean more toward getting exchange services from the federal government.

Analysts at the in-house government affairs and human and social services think tanks at KPMG L.L.P., Wilmington, Del., make that argument in a brief on the possible impact of the PPACA ruling.

Members of the court ruled 5-4 that Congress has the authority to impose a tax on residents who fail to buy health insurance.

The court ruled, however, that Congress has no authority to reduce existing Medicaid funding to make states expand their Medicaid programs to provide coverage for all residents who earn less than 133% of the federal poverty level.

Officials in some states say they will try to expand Medicaid access despite the ruling, but officials in other states have said they will continue to do everything they can to block PPPACA implementation, including implementation of the Medicaid expansion provisions.

The KPMG analysts look at the question of whether a state that decides not to expand Medicaid access to the required level should think about operating a state-based health insurance exchange.

PPACA calls for states to set up exchanges that would help low-income individuals get access to government health insurance programs, such as Medicaid, and higher income individuals and small businesses use new tax subsidies to buy commercial health coverage.

In states that do not set up exchanges by Jan. 1, 2014, the U.S. Department of Health and Human Services is supposed to provide exchange services.

“The reality is that nationally the vast majority of the newly insured under [PPACA] would have been enrolled in Medicaid under the expanded program,” the KPMG analysts write in their brief. “If the program is not expanded, the uptake into an [health benefits exchange (HBE)] will be greatly reduced and the population that is left may not provide the critical mass necessary to warrant a state-based exchange or make it economically sustainable.”

Once a state decides what to do about Medicaid expansion, it ought to look carefully to see how that approach would affect the viability of a state-based exchange, the analysts say.